1. The Federal Reserve pursues five specific objectives to reduce economic and financial system volatility. The purpose of a monetary policy framework is to:
A. provide the Fed with a measure of goal flexibility without having to communicate policy changes to the public that could disrupt financial markets.
B. make it clear to the public the specific goals that the Fed is pursuing.
C. allow the Fed to operate in secret in order to pursue monetary policy objectives more effectively.
D. give the Congress an opportunity to alter monetary policy, but within limits.
2. A way for policymakers to avoid the problems that deflation can present and still meet their objective of price stability is to:
A. keep the monetary base fixed.
B. set a target of zero inflation.
C. target a nominal interest rate of zero.
D. set an inflation target of two to three percent.